Sharechat Logo

Trustpower backs out of Ruataniwha water scheme as council sets public consultation

Thursday 27th March 2014

Text too small?

Trustpower, the electricity company controlled by Infratil, has walked away from the $265 million Ruataniwha water storage scheme, the same day the Hawke's Bay Regional Council set the timeline for public consultation.

The power company terminated its memorandum of understanding with the council subsidiary, Hawke's Bay Regional Investment Company, and Ngai Tahu Holdings, which would have seen it invest between $50 million and $60 million of the total cost of the project. The council investment company this week recommended the local authority invest up to $80 million in the scheme.

"Trustpower has determined that it will not be possible to invest within its risk and return framework for a project of this nature," the company said in a statement.

While there was clearly sufficient short term appetite for the scheme to justify its construction, the long term uptake by farmers and other irrigators was not strong enough for TrustPower to feel comfortable committing shareholders' funds, the Tauranga-based company's general manager, operations, Chris O'Hara told BusinessDesk.

"Projected cashflows were not meeting a rate of return that would meet shareholder expectations," he said. While the project was politically contentious, that was not a factor in TrustPower's decision.

O'Hara questioned the viability of any other proposed greenfields irrigation schemes, given the Ruataniwha scheme was "among the best greenfields opportunities in New Zealand."

"If this one can be made to work, I'm not sjure there's another one that will take its place."

TrustPower also has irrigation schemes on the books on the Canterbury Plains, which would also generate hydro-electricity. However, they differed from the Hawke's Bay scheme because they relied on the relatively large natural storage available in Lake Coleridge. The Ruataniwha scheme requires the construction of a storage dam.

TrustPower's move comes less than three weeks after HBRIC issued a preliminary investment memorandum seeking expressions of interest from investors in the region to participate in the scheme, which will require the support of farmers and other irrigators in the catchment in order to be economically viable.

It coincides with the council's release today of a timeline for consultations on the contentious scheme, which has sparked national debate over its potential impact on the Tukituki River and the growing intensification of dairy farming.

Last September Trustpower and Ngai Tahu's investment arm said they might fund 30 percent to 40 percent of the project. The council said the scheme had the potential to supply water for irrigated farming and horticultural uses to between 25,000 and 30,000 hectares of land, and was expected to create about 2,520 jobs for the region.

The council today set the timeline for public consultation with a view to making a final decision on June 25, having released its 70 page business plan for the scheme yesterday.

The proposed dam became a political football last year when Conservation Minister Nick Smith was forced to deny he had tried to hose down his department's concerns about potential water pollution or meddle with its submission.

The Labour Party's water spokesperson, Whita Maitiri, launched a private members' bill, dubbed the "Don't Turn the Tukituki Toxic" Bill today on the banks of the Tukituki River.

Shares in Trustpower were unchanged at $6.49 today. The company is likely to brief in greater detail at next Thursday's Infratil investor day in Wellington.

 

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Sanford FY earnings flat on reduced volumes
NZ dollar extends gains, aided by US-China trade doubts
12th November 2019 Morning Report
MARKET CLOSE: NZ shares gain, retirement villages buoyed by Auckland housing market bounce
NZ dollar rises, shrugging off US-China trade war woes
Long-serving ACC investment chief calls it a day
Institutional investors continue to shun Fonterra
Card spending stalls; dearer petrol crowds out other goods
Abano directors cave to takeover by scheme of arrangement
Fletcher dismisses subcontractor claims as vague

IRG See IRG research reports